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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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marekt sell off because a slight decrease in retail sales ,but your house can go down 10% and we have a trillion in resets coming = no big deal
Flat, I see you are up early this morning and I see you are making your typical understated point which is right on the money. Yes, Wal-Mart buyers skipped buying a bag of marshmellows so the stock market drops 1%! 200,000 foreclosures? Not a problem. Keep on trucking…..oh wait, did you say trucking is down. No one needs a new refrigerator for the new home when they being foreclosed?
One interpretation: Some interpreters suspect that the drop in marshmallow sales at Wal-Mart casts doubt on whether “subprime is contained.”
Weekend topic: what sort of research project could determine the immediate destination of HELOC money after it passes through immediate borrower’s hands? This is tricky because of course it gets commingled with borrower’s other funds. We have a lot of creative people here. Someone should be able to figure this out. More generally, how to quantify the effect of no more HELOCs.
HELOC (or any other type of borrowing) is the creation of new money in our monetary system. No more new money being created means the old debts can’t be serviced (how can you pay back a loan with more money than you took if there isn’t additional money in the supply). It isn’t normally a large problem, because it doesn’ t happen on a large scale. The question? Is this scale large enough to cause a significant problem? You better bet it is.
The largest since the creation of the Fed Reserve. The money flows to certain places first during increases in the money supply. Is there any doubt where it has flowed? Stocks, bonds, real estate (all not counted in CPI). This will be interesting.
“did you say trucking is down”
Cough/cough/cough…
I know nothing,NOTHING !!!
Not that i am in the industry or anything…
Chris
ok, how is truckign doing?
I allways took trucking and delivery (fedex, UPS) to be leading indicators of overal econimc health.
I will not say who i work for but the latest projections are a pullback to 01/02 earnings before the end of the year. It is already happening now. We were up till about a month ago. In 30 days income has dropped off a bunch.
My corp usually leads the greater economy by 6-9 months in normal instances. I have been here 15 years so have been thru a couple of cycles…
Chris
Looking forward to reading your regular contributions.
Insider anecdotals like this are one of the (many) things that make this site so great.
WS Bulls are thrilled of signs that the economy is headed into a recession, as it is a sure indication that helicopter drops of liquidity will soon come to the rescue of the market. (Never mind that history shows the stock market normally tanks during a recession…)
———————————————————————–
MARKET SNAPSHOT
U.S. stocks rise on upbeat inflation data
Markets turn to hopes of Fed rate cuts; Applied Materials upgrade lifts techs
By Nick Godt, MarketWatch
Last Update: 10:42 AM ET May 11, 2007
NEW YORK (MarketWatch) — U.S. stocks rose on Friday, after upbeat news on wholesale inflation and weak retail sales boosted hopes that the Federal Reserve will eventually cut interest rates to boost a slowing economy.
A government report showing weak April retail sales was already expected by the market, which fell sharply Thursday when individual retailers posted bleak monthly sales.
http://www.marketwatch.com/news/story/us-stocks-rise-upbeat-inflation/story.aspx?guid=%7B55C45F45%2D4AA4%2D465F%2DB0CE%2DB09A489DDDC6%7D
My bet is you work for Kulicke (KLIC)
I’ll chime in on the trucking……service of older models is significantly increased YOY (aka….fix the old, not buying new) good for service centers….sales up yoy >15%. Ill also note our service center is adjacent to Bayliner Mfg facility, and we handle oversized load shipments via a pilot car service, shipments are off, yes, off >25%….they aint makin, and shipping boats round these parts…. aditionally pricing pressure in CAT, Cummins, and Detrtoit is heavy, 2 price increases in last 6 months
Lastly, service centers are also increasing prices in conjunction with parts…..gotta get the margins up, cause renewals on Medical coverage is coming in at 11% for same coverage (after last years 30% increase, it seems like a gift)
phew…..glad I could get that off my chest, now back to your regular blog.
anecdotal observation, central oregon, I-5 frontage
thank you for playing
Anyone know how Richmond VA is faring?
Price declines etc?
Allstate announced they’ll no longer be writing homeowner insurance policies in California…
This comes on the heels of USAA announcing they’ll no long be writing homeowner insurance policies in Florida, last month.
Florida is a disaster, ecologically. Check out this map of the state from The Drought Impact Reporter and click on the county of your choice and have a read of the various drought impacts. Many of the wells in F el lay are experiencing salt water seepage, which means soon, there’ll be very little freshwater. There are in excess of 200 fires going on as well.
http://droughtreporter.unl.edu/map.jsp?&src=&daterange=month&c_ot=on&c_wa=on&year2=2007&year1=2007&c_ag=on&day2=11&scn=nv&day1=11&c_fi=on&c_en=on&month2=5&month1=4&c_so=on&Cmd=sv&st=Florida
If Korporate Insurers aren’t willing to take the risk of insuring your house, doesn’t that speak volumes?
Attention Californians, insurance problems are not just confined to Florida. Better get the lube out…
Allstate to Stop Insuring California Homes
http://biz.yahoo.com/ap/070511/allstate_california.html?.v=4
Someone did a study recently on arson stats in a housing recession. It showed a substantial increase in flamers. Could it be that Allstate, who is refusing to write NEW policies, but will still service existing policies, is trying to dodge the FB’s who will torch their upside down stucco boxes?
If a policy costs $1,000 a year for a $300,000 home, it does not take too many flamers to eat into the profits!
Okay, so they’re reducing exposure to calif, floriday, & ny. hmmm.
California– wildfires & earthquakes..check.
Florida — wildfires & hurricanes..check.
but New York?— the Knicks?
New York…..hmmm….must be when that fission weapon of peace by the Religion of Peace goes off for CNN/Fox to watch (wall to wall coverage and now a message from our sponsor).
If you are going to have a show, might as well be Broadway for media exposure.
Yah, Allstate would not want to be in big in NYC after that.
LOL - good one.
The Knicks!! that was too funny…
All state stop writing home insurance in Delaware as well.
So cheezbubbler what do you call the Delawarans?
“but New York?”
9-11
New York (Long Island, in particular- they aren’t actually worried about the rest of the state) would have great swaths be submerged if a Cat 1-2 hurricane came up and hit Long Island directly. Given the amount of buildup in the area the damage probably would make Katrina look like a warmup. Anyway Allstate has the majority of homeowners policies in the NYC area and is just looking to diversify because their concentration of risk is too great (not drop all their existing customers entirely).
Well Hiro saved the cheerleader so there shouldn’t be any problem, right? ; -)
Maybe they know there will soon be lots of arson going on. Can’t make the payments? Burn that mother down.
California is not exactly without its own insurance issues, especially when you layer the FB’s arson motive onto drought conditions. And there is the usual four-season combination of factors which makes homeowner coverage a risky proposition in CA (fires, floods, earthquakes and debris flows).
Slightly OT, I am saddened to see paradise burning on the front page of today’s SD Union Tribune…
http://www.signonsandiego.com/news/state/20070510-2141-ca-islandfire.html
The way FBs behave, they probably wouldn’t hesitate to use insurance claims the same reckless way they’ve been using HELOCs. Maybe Allstate is trying to head them off at the pass, since the HELOC option has been tapped out (ouch, mixed metaphors.)
Wahoo! Destin condos for everybody!
http://pensacola.craigslist.org/rfs/327581992.html
Those conds are hideous! And only $225 / sq.ft.
No shortage of condos there. Could be your “destiny” to own one, perhaps?
And more condo’s coming courtesy of the corrupt FLA legislature.
And more condo’s coming courtesy of the corrupt Fla Legislature:
http://heraldtribune.com/apps/pbcs.dll/article?AID=/20070511/BUSINESS/705110303
At $30K, I’m interested…
Thanks…..but no thanks
Wahoo! Destin/Niceville SFR’s available for everybody! (if condos are not your bag baby!)
http://pensacola.craigslist.org/rfs/327573345.html
I’d buy one of those…if it had an acre of land…and were 1/3-1/2 the price…and in a different state…
Realtor Amy Lee looks like she was too cheap to get a new ad picture after she switched careers from stripper to realtor…
Wahoo! Sacramento houses for everybody. Countrywide can not seem to dump foreclosed inventory fast enough as it is growing 10% a month. Prices are being slashed 5-15% every 30 days.
Ex: 2139 Roanoke Ave, was $230,900, now $189,900. 1,130 SF for $167/SF. Hmmm, should I buy now, or wait another 30 days? Hmmm, should I buy now, or wait another 60 days. Hmmm, in 90 days, this property will be $150,000, IMHO.
See all the Countrywide foreclosures at this wonderful tracking blog: http://www.streamfx.com/CW/REO-California19.html
You can see Roanoke, with all its metal security fencing at
http://www.metrolistmls.com/
The rout of the lenders is starting. I think they will be handing the home builders their a$$es back to them! 2009 will be a very interesting year.
Weekend topic: Show me a Lender eating some real estate. Wells, Countrywide, GMAC, Deutsche, HSBC. I want to see some chips starting to fall.
SAcramento county has coughed up a 10% discount from previous assesments- what’s your county doing for you ?
beter call ,email, fax your local pol today !
Show me a Lender eating some real estate ??
Here is one for you…..I saw a closing statement this past week that had the lender takeing a $316,000. hit on a short sale….
I’m kind of disappointed that Countrywide has only 1327 foreclosures in California.
Apologies Ben—thought I was in the Bits Bucket.
Whatever that was, Craigslist took it down.
Seems to happen alot. Good for them, keeping the fraud down to a low roar. Maybe in future people should cut and paste the fraud-y craigslist listings.
Article in WSJ this week covered areas where prices are still currently rising, mainly because bubble area residents and midwesterners are moving away. Areas mentioned included Austin, Charlotte and Raleigh.
A realtor friend (I do have ONE, just one) last night told me he is selling his Accord to buy a Suburban. This week he had 3 mid-50’s couples currently in FLA, all friends, all from up North originally, who want to move together here to Greenville (SC) this summer (planned price range 400K). He said his firm is seeing a ton of this, esp. from FLA. Thought it was interesting.
I think relocation to the “affordable” areas from the most heated bubble areas will stop very quickly as soon as the true haircuts come.
People in Chicago seem to think that our area is booming both regarding to RE and population because we are so affordable compared to NY, LA, MIA etc (no matter how many times I show them numbers that Chicago’s & Illinois’ population has remained falt during this RE boom it doesn’t seem to register).
I contend that when a $1,000,000 home in CA gets it’s 50% adustment and is priced the same as a similiar house in the Chicago area you will see FLIGHT from Chicago. I love Chicago but if one can get the same house for the same price in a better climate within driving distance of an ocean and greater natural beauty surrounding the area what are you gonna do? That will then help start the true correction in this area.
>I think relocation to the “affordable” areas from
>the most heated bubble areas will stop very
>quickly as soon as the true haircuts come.
I disagree. Many are people who bought well pre-bubble and resisted the HELOC temptation. They may not get what their neighbors got in ‘05, but they can still sell and walk away with a nice chunk. Enough to downsize into a more affordable area and have capital reserve. In fact, the exodus to afforability may increase because now the boomers can’t afford to sell the house and buy the midtown condo with easy access to the theatre and art openings regularly.
That’s a fair point. I guess I could see that happening when financially sound boomers (which are not as great in number asa most think) start retiring. They might go to the more “afforadable” markets with temperate climates, the Carolinas for example. I guess I was looking at it from a more Chicago centric view. I don’t that scenerio playing out up here, not in any significant #’s anyway.
Fla. migratory outfow:Could it stemmed by falling house prices?
http://heraldtribune.com/apps/pbcs.dll/article?AID=/20070511/BUSINESS/705110344/1007
Given the rate at which home prices are falling there and the reluctance of buyers to catch falling knives, I would guess the migratory outfow could be stemmed by the end of falling house prices, but not until they stop falling and everybody knows they have stopped falling.
That’s a great point, GS, but I would add one slight caveat.
If Florida prices reach the point where people from elsewhere can purchase for cash as ’sunk cost’, they may be tempted to move even if prices are still falling on a ‘live here until I die’ basis. Especially if SOH or other legislation suggests that taxes would remain very low.
“…for cash as ’sunk cost’,…”
Sorry — I forgot about all the rich snowbirds who will be moving south to Florida from Chicago, Cleveland and Detroit with enough cash in hand to purchase an overpriced, uninsured home in the path of future hurricanes…
I did say “If”.
You would know far better than I how much prices would have to fall relative to other areas before this process kicked in with any significance, but I can assure you I have seen this happen in more than one coastal area of Australia.
I have friends who made a move like this from my city, and paid cash at the coast 2 years back. Their only interest in house prices now is how much they’re likely to leave their kids …
It will take a while and much lower prices to stop the flow here in South Florida. I know at least a dozen people with plans in the work to leave. The only thing that is keeping most of them here is their inability to sell their homes.
It’s hard to say what will happen. People are sheep. Will they continue to think that they have to have a house and keep buying? Or eventually when things bottom out, will they think that real estate is always a terrible deal? A lot of people took a long time to start buying stocks again after the 2000 peak (which of course is when they should have been buying.) And I remember when we bought our first house in OC Ca in 1993, my in-laws, who had made a bad investment in a RE limited partnership in 1988, begged us not to buy because we would lose money.
This is so true! I’ve been here in So Fla for nearly two years and it’s amazing how many people I talk to who are leaving. Just yesterday, the huz and I were at the bank and the teller said she was movin’ to Carolina as soon as her house sells. Next door neighbor’s grown kids are going, three other families on my block, about seven families from my kids’ school, many, many are desperate to move outta Florida. Most are going to Tennesee, Georgia or the Carolinas. The only folks who don’t/can’t leave seem to be my latin friends, way too many extended family members in the area to leave behind.
Some analysts are making a connection between April retail numbers (weakest in 37 years) and the housing market situation.
Next shoe to drop (wait 3-6 mos for this story to break): Analysts realize that weakness in retail feeds back into the housing market…
———————————————————————————–
Retailers post sluggish sales figures for April
Housing, cost of gas, early Easter blamed
By Anne D’Innocenzio
ASSOCIATED PRESS
May 11, 2007
NEW YORK – The outlook for consumer spending in the coming months dimmed yesterday after retailers, their sales hurt by rising gas prices and the slumping housing market, had one of their worst months ever in April.
…
Analysts had already expected last month to be disappointing after an early Easter motivated many consumers to do their holiday shopping in March, siphoning away part of April’s business. But sales were much softer than expected, raising concerns that retailers will also see disappointing results in the months ahead. The good news, according to John Morris, managing director at Wachovia Securities, is that first-quarter earnings seem to be holding up, with only a handful including Abercrombie & Fitch reducing their profit outlooks yesterday. Most retailers report their earnings this month.
Nevertheless, the UBS-International Council of Shopping Centers sales tally of 53 stores posted a decline of 2.4 percent, the biggest drop since the index started tracking the data in 1970. The tally is based on same-store sales or sales at stores open at least a year, which are considered a key indicator of retailers’ health. Michael P. Niemira, chief economist at the ICSC, called the drop in same-store sales a rarity, noting that this is only the third time since 1970 the overall index declined.
For March and April combined, which provides the best read on the spring selling season, the tally was up only 1.8 percent, below the 2.8 percent forecast. Niemira said it was the weakest spring performance since 2003, when the tally registered a 1.5 percent gain for the two-month period.
Analysts will be closely watching how May fares, since the month will provide a better indication of consumers’ health. Concerns are rising that shoppers can no longer bear the weight of the economy’s woes.
“The slowdown is at hand,” Niemira said.
The housing market slump, which had already hurt sales of home-related goods over the past year, seems to be having a greater impact on retail sales. For years, shoppers had tapped into home equity as a source for cash, but rising interest rates have curbed that practice, and rising mortgage defaults may be spooking consumers.
http://www.signonsandiego.com/uniontrib/20070511/news_1b11retail.html
P.S. The last bit (”…mortgage defaults may be spooking consumers”) is part of an ongoing mischaracterization of the situation at hand by the MSM which suggests that the slowdown in consumer purchases is due to a conscious choice by rational consumer-deciders to stop spending. This ignores the effect of debt-addicted consumers meeting the brick wall of an empty housing market ATM machine thanks to negative home equity appreciation. It is not that consumers have “decided” to reign in spending, but rather the tightening noose of falling home valuations has severely tightened their spending budgets.
This is an important distinction, because it implies that retail spending is likely to stay weak until home price inflation is back on track again — never mind what consumers “decide” to do.
“It is not that consumers have “decided” to reign in spending, but rather the tightening noose of falling home valuations has severely tightened their spending budgets.”
Hence, rising use of revolving credit (I’ll just charge it!)
“Hence, rising use of revolving credit”
A band-aid, not sustainable…
Interesting info GS, thanks.
I actually suspect that it’s not that people are charging MORE because thay can’t get a HELOC. I suspect that they’re charging the same amount, but the ballance is staying on their CCs since they can’t HELOC and pay off their CCs. It may be a distinction without a difference, but I think that alot of sheeple don’t even realize that they’re living beyond their means, they just think that they’re getting hit by the RE bubble collapse and maybe the subprime implosion. If you spent less than you earned, you wouldn’t NEED a HELOC idiots.
They also mischaracterized the problem being “rising interest rates” that caused people to stop tapping their equity. As HBB constantly emphasizes, there’s a lot more to it than that. The FBs didn’t let a little thing like rising interest rates stop them from bidding up the price of real estate, while simultaneously squeezing every big of equity from their houses.
“rising interest rates”
I agree. And conversely, other than signalling the Fed’s fears that the economy is “weaker than expected,” a 1/4 point drop in the FFR at this stage will have no more effect than the BOJ’s dropping interest rates to the floor in the early 1990s had on the Japanese economic picture.
Those pesky $10,000 and $20,000 credit line limits per card and the 24.9% interest rate based minimum payment really put a damper on spending after a while. If one can’t migrate this debt to the house, game over…
Yes, the game should be over. So now let’s bring down the house prices!
Related story: Some Wall Street commentators are openly pandering for increased helicopter drops of liquidity from the Fed…
——————————————————————————
Market’s surge ends on weak sales data
Concerns rise over consumer spending
By Madlen Read
ASSOCIATED PRESS
May 11, 2007
NEW YORK – Wall Street retreated sharply yesterday, slicing nearly 150 points off the Dow Jones industrial average after weak sales at many of the nation’s major retailers heightened concerns about consumer spending.
The day’s economic news, which also included a disquieting trade deficit figure, appeared to give investors the rationale they were looking for to cash in some of the market’s recent gains.
Analysts have been saying the surging stock market, which had pushed the Dow up more than 1,000 points since the beginning of March, was due for a pullback.
Companies including Wal-Mart Stores, J.C. Penney and Federated Department Stores said business fell in April, hurt by rising gasoline prices. Though many retail stocks had respectable gains yesterday, the reports raised worries that retail sales data from the Commerce Department due today will also disappoint, and suggest that the economy is slower than previously thought.
The downturn in stocks followed a rise Wednesday that pushed the Dow to its 21st record close of the year, after the Federal Reserve left interest rates unchanged and reiterated that while the economy has slowed, inflation remains the central bank’s primary concern.
Yesterday’s sluggish retail sales and widening trade gap raised concerns that, while a rate cut may be necessary to boost the flagging economy, the central bank will be loathe to make one because of inflation.
“What the Federal Reserve said yesterday is that their principal focus is on inflation, and what retail sales said today is that their focus should be on the economy,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “Things are not good out there in economy land.”
http://www.signonsandiego.com/uniontrib/20070511/news_1b11market.html
Slim here with a question: Why is the U.S. economy SO dependent on consumer spending? (The widely used figure is that 2/3 of our economic activity is consumer spending.) Has it always been this way? Economic historians, let’s here from you…
I’m with you Slim. For years they’ve been telling us that the American consumer is the linchpin of the economy. OK, I believe you. Then yesterday the bad retail sales news comes out, stock market falls. OK, that makes sense. Then today everything is back up again, and the analysts I watch on CNBC say no biggie. What gives?
Well the reasoning was that the foreign investors mainly Chinese Investors have so much liquidity that they are now pouring it into the stock market. This in spite of the fact that some Corporate earnings have not been so good. Kind of a Market Euphoria taking place in Asia and its driving stock prices higher.
I would like to suggest a somewhat light hearted (perhaps even creative) topic for weekend discussion. What new reality shows would you suggest to replace Flip that House/House Hunters/etc. in the new market…Rent that House might be obvious, or Bankruptcy Attorney Hunter, but what about something really fun? Any ideas?
How about a reality show about the foreclosure process? For example, how do creditors deal with deadbeat owners who have stopped making mortgage payments and refuse to move out? What does the inside of a home look like after the angry former owner has gutted it to spite the creditor? This show could be both educational and entertaining, as it would serve as a warning to future homebuyers not to buy stuff they cannot afford.
Eat That House?
ALIS, you should be banned. Too funny. Too much coffee on my keyboard in the morning….
“Take My Mortgage…Please”
“Fix this McMansion” about families who find out that their $750K Toll Brothers brick front dream home is really just wet OSB and fake stucco. You could have a spinoff “The house is okay, but can someone please Pay My Power Bill.”
“Falling Knife:” HELOC/neg-am is resetting. Can they sell the house before the value drops too much to break even? Should hold out a little longer for the break-even price, or should they drop the price now and bring the Escalade to the closing table to make up the loss? It’s a race against the clock!
“Rescue 911: Starving Squirrel”
“Rescue 911: Starving Koi”
“Where are they now?” Casey Episode, Suzanne Episode, “in the bag” episode, David Learah Episode…
“Bitter Renter Revenge:” Responsible person saves up and builds dream home and still has money left over.
“Partition this McMansion” Jingle mail leaves an unoccupied in the outer suburbs. Follow the guv worker as he tries to make it suitable for Section 8…
With Spinoff “Peak Oil Redux:” Convert said McMansion to self-sufficient veg farm/commune for families who can’t get gas to drive. Can they grow enough zucchini? Can they get the slacker pothead to weed his assigned patch? Is the spetic tank big enough? Follow the group dynamics ..
How about a show on creative uses of McMansions by occupants other than the junior executive set to whom these were pitched? This could include:
1) Transient squatters
2) Drug producers (meth labs / pot farms / THC factories)
3) Four Mexican families living under the same roof
4) Bordellos
5) Vacant cash laundering “investments” for organized crime operations
6) Nobody at all (document ghost McMansion tract communities in the desert SW which were built but where nobody came)
3) Four Mexican families living under the same roof ??
I recently toured a apartment complex for a out of state client…..Pile of at least 20 bicycles in the court yard…In trying to confirm rent roll I could not find anyone that spoke english….
“Desperate Houseflippers”
“American Idle” - a show about unemployed RE professionals.
Oh, that’s a good one!
Seriously, I think that a TLC program that featured financial makeovers would be VERY successful. They could take couples at facing bankruptcy and/or forecloser and hook them up with a group of quirky financial advisors and attorneys.
The only problem is you can clean-out clutter or remodel a room in a weekend. You can fix up and flip a house in a month. Fixing the financial woes of all these morons holding subprime, ARM mortgages coupled with double-digit credit card balances could take years.
HGTV could never handle that. PBS Frontline would say, Bring it On.
There’s a program like that on A&E - Big Spender.
http://tinyurl.com/2y9o4k
They definitely need more financial makeover shows. The only problem is people who are stupid enough to buy when they have no downpayment and know they can’t make the payment after the 1st year would be too stupid to even turn it on.
-The Young and the Equityless
Foreclosed upon and bankrupt, twenty-one year old former RE moguls compete in community service projects around the nation for the chance to get their credit cards paid off.
-Days of Our Knives
Following buyers and flippers though the many bottoms to the market, as called by the NAR. Where will the Real Bottom(tm) be?
-Who Wants to Sell to a Millionaire?
Sellers trying and competing to get their home under contract with a skeptical millionaire renter.
-This Unsold House
A documentary following the western ghost tract towns of the 2007 Real Estate Bust over a period of a few years.
-The No-Deal World
Life after mortgage financing and selling homes. What happens when you go from $300K to $30K a year after the buyers are gone?
Wonderful, SD. Even this cheapskate will buy a subscription for those shows!
Come December, we could have:
-Jingle Mail, where FBs leave cookies out for the REPO men taking all of their toys, and mail the keys to the mortgage company as they move into a small rental apartment in a bad section of town. “Momy, how will Santa come now that we have no fireplace?” “He’s not comming this year.”
“My House is Worth What?” Except this time, they are all upside down.
Fawlty McMansion:
A snobbish, miserly, xenophobic, and sexually repressed FB turns his McMansion into a hotel in order to pay the mortgage. Running his hotel forces him to cater to guests that he despises.
“To Catch a (lending) Predator”
Each week we’ll send in an actor who pretends to be a clueless FB who claims to make $10k a year and can barely speak English. Then, when the broker sits down and prequalifies them for $300k on an Option ARM, we rush in with cameras.
(A)ppraise the Lord
A show that celebrates faith-based appraisals. Could also include faith healing of FICO scores.
AKRon. You win as far as I’m concerned. Your talents are wasted in the north.
string up the landlord!
I’d like to hear about businesses in other parts of the country that are going out of business. I went to the mall in Monterey last week and was surprised to fine that Big 5 has closed its doors. One big supermarket here is Salinas closed after the first of the year. Lots of smaller commercial properties have also lost tenents.
I was talking to a Salinan a few weeks ago and he told me that in digging wells deeper and deeper to supply water for agriculture, they’ve hit salt water in many locales…
Cabbages and Kings anybody?
http://www.gutenberg.org/etext/2777
The time has come the walrus said
To talk of many things
Of shoes and ships and ceiling wax
Of cabbages and kings
Of why the sea is boiling hot
And weather pigs have wings…
ALIS in Wonderland
Very nice A Lad In Sane (ALIS)
You know, I can’t give any testimony on actual businesses failing, but I can talk to some odd behaviors I’ve seen in the general populace.
I was waiting in line at CVS (big chain pharmacy) one evening this week and a woman cut in line. The people in front of me assured me that she had been there before and had to go get something, which I always think is rather odd, but whatever.
Anyway, she was dressed extremely well in an off white pants suit, very well tailored and perfect fit. Blond hair from the back, a little dried out, but OK cut. Then the issues started. It looked like she was returning some women’s razors. Nothing fancy or electric, just the stuff that is one step up from disposable - you keep the handle and change the blades. It took a while, but the kid asked for a driver’s license. I don’t think she was writing a check, but what ever it was, it required ID. She had a fit. They had to call in the front of the store manager, then the whole store manager. She was lecturing them about “the sorts of things that happen these days”. No idea what that means. MD doesn’t use SS #’s on liscences so it isn’t an identity theft issue. When she turned around I could see that her dye job was WAY overdue - the brown stripe down her part must have been 2 inches wide. That is three months or more without a trip to the salon.
I think this means something, but I don’t know exactly what. A person who dresses like she has all the money in the world standing around CVS arguing with high school kids over corporate return policies? or not getting her hair done between January and May? Something is going on here…
Me? I just wanted to get a couple of half price jars of Skippy.
That’s pretty funny. She probably is a realtwhore and hasn’t made a sale in a while…
I work in retail (grocery), and I will tell you, the biggest scam items are razors, batteries, high priced items that are small. They steal it, and then come back and say, I want my money back. That is why you ask for a dl. You hope to discourage this behavior, or at least have an idea if someone does it more than a few times. That is also why most places won’t give you money w/o receipt.
So we should be expecting threadbare designer clothes, rusty BMWs, and ladies in need of hair and botox touchups in the next couple of years. Lovely.
Let’s have some fun. Create your own Day o lyrics. A couple posters started yesterday. Here is a little more:
Day-o, day-ay-ay-o
Daylight come and the NAR chief go home
Day, he say day, he say day, he say day, he say day, he say day-ay-ay-o
Daylight come and all the lies get exposed
Work all night on a drink a’rum
(Daylight come and the mortgage man say no)
Stack banana till morning come
(Daylight come and the FB lose home)
Come, Mr. Tally Mon, tally me banana
(Daylight come and the mortgage industry implode)
Come, Mr. Tally Mon, tally me banana
(Daylight come and the mortgage man go broke)
It’s six foot, seven foot, eight foot, BUNCH!
(Daylight come and the flipper can’t flip home)
Six foot, seven foot, eight foot, BUNCH!
(Daylight come and now the flipper rent home)
Day, he say day-ay-ay-o
(daylight come and the MBS market explode)
Day, he say day, he say day, he say day, he say day, he say day
(Daylight come and the liar loans get exposed)
….
Link to lyrics: http://www.seeklyrics.com/lyrics/Harry-Belafonte/Day-O.html
Link to techno-video: http://www.youtube.com/watch?v=VUCes1ZYFTE&mode=related&search=
Daylight come and the Fed chief still duh know…
Day, he say day, he say day, he say day, he say day, he say day
Daylight come and Goldilocks bite the pillow…
REVIEW & OUTLOOK
Freddie Krueger Mac
May 10, 2007; Page A16
Just when you think they’re defeated, Fannie Mae and Freddie Mac arise in Congress to kill any attempt to clean up their dangerous habits. This week’s scary movie comes as an attempt by four Members to blow up a carefully negotiated deal between Treasury Secretary Hank Paulson and House Financial Services Chairman Barney Frank.
(Google “Freddie Krueger Mac” then click “Search News” to access the full editorial…)
The Fannie Tax
WSJ Online
…
And yet the current meltdown in the subprime and Alt-A mortgage markets has led to calls — by the same people now dunning Fan and Fred — for all kinds of new lending oversight, rules and restrictions. Mr. Frank’s latest brainstorm is to stick investors in mortgage-backed securities with the losses when subprime borrowers default. It’s hard to imagine a measure better designed to cut off credit to those Mr. Frank claims to want to help. If investors don’t have legal certainty about the debt they are buying, they won’t lend the money. And no new subprime lending means no homeownership for many Americans. But maybe this is what Mr. Frank meant when he told Bloomberg News that “more money was lent than should have been lent.”
(Google on “fannie tax” then click “Search News” to find the full article)
The last line is a doozie:
The reason Fan and Fred became rich and unaccountable isn’t because they knew the housing marketplace; it’s because they knew how to work Congress.
Stucco, We may have to limit you to one comment per thread….
Get your own blog if you want to be the decider.
Lighten up.
Sounds to me like Jingle is running out of clean coffee-free keyboards….(?)
I was trying my hardest to be light — that’s why I mentioned THE DECIDER…
It sounds like the music has stopped playing and all the kids at the party are desperately trying to find a chair to sit in.
That is what the central planners (Board of Governors of the Fed) have been doing since off the gold-exchange standard. This time, they are in way over their heads. All their bureaus, stats, figures are as fallacious as those from the former Soviet Union.
The music stopped a while back. Folks have been grabbing chairs. There are only a few left. The Fed is going to cut? Do folks think the Fed has never heard of Gresham’s Law?
As a newcomer to the blog, often I am clueless about ongoing topics. For instance, who the heck is Suzanne and what is her story?
She’s the off-screen star a realtor commercial…
http://www.youtube.com/watch?v=Ubsd-tWYmZw
Eeew. I saw that commercial back when it originally ran. Given everything that has happened since then, that couple looked underwater before they even got there - haggard, stressed, unkempt.
Poster Suzanne is really a man I believe. “Suzanne researched this” is a line from an advertisement between a FB and his wife and a realtor named Suzanne. Here is the ad:
http://www.youtube.com/watch?v=Ubsd-tWYmZw
And Get Stucco takes his name from a Groucho Marx line, Groucho having lost alot of money on Florida Real Estate.
The names are very clever, as are the people! What Marx brothers movie is that?
http://en.wikipedia.org/wiki/The_Cocoanuts
(Google is your friend :))
A topic I think would be interesting is a comparison of existing housing inventory to potential first-time buyers. For example, a ratio of inventory to “qualified” first-time buyers. Presuming most existing sellers can’t buy until they sell first, this ratio may be in indicator of who is left in the pool of potential buyers.
Ideas for criteria:
1. Potential buyer = first-time buyer and married and above x household income
2. Qualified buyer = Ability to qualify for a mortgage (and able to make a down-payment of x percent)
etc.
What is the pool of potential buyers that:
1. Doesn’t already “own” a house
2. Who is qualified to buy a house
3. Who wants to buy a house
An analysis of:
1. Inventory growth compared to potential buyers by metro area.
2. The ratio, by metro area, of potential buyers to the amount of inventory in their respective price ranges.
3. etc.
Any thoughts on this idea?
You don’t have to be married to buy a house, and that may be part of the problem.
Used to be, you waited until you were married to buy. I’m not married, but I am a well situated professional. My early career stuff has come and gone and I’ve found a great position that makes me happy and is very stable. I’ll never get rich doing this, but I can live. During that early career stuff, I paid off my student loans ($70K in 3 years), and built up some money in my retirement accounts and some in my bank account that should be more than enough to cover a 20% downpayment plus closing/moving/furniture costs. Meanwhile I am not happy renting a one bedroom, but I can live with it. I have boring car that I bought for cash, a degree beyond my professional degree that was half paid for by a former employer and half paid for by me (for cash) and no debts of any kind. My credit is pristene. Buying a house makes sense for me enven though I’m not married.
There are some much younger people in my office. They think they should buy right away. One, who isn’t married is adament about this. We talked about it yesterday. She said that she would buy a place right this minute if she had any money at all. She couldn’t possibly wait if the opportunity were available to her at all. Now, she is working on one really big project in our office. When she finished she will have great transferable skills, but not really be ready to do anything in our department, so she will probably have to move to somewhere else in the agency. That might mean moving to another building a few blocks away, or it could mean moving much much further. She doesn’t seem to see this as an issue when it comes to buying. Also, her credit is bad (largely because of some now resolved health problems) and she has over $100K of student loans. And she is under 30. How can a person in that situation think it is a good time to be looking to buy real estate? How? She has a roommate. They have a nice rental 20 miuntes from the office. That time of life is made for renting. I think it is a cultural thing. When did “kids” get the idea that you buy as soon as you have a job? Is it really just from the last 6-7 years where you made a profit in most places just from owning for a year or two? Don’t parents have any influence? The parents remember the last real estate slum, don’t they?
Polly - I was just trying to establish some general criteria for the types of people most likely to buy. No offense intended (if any was perceived).
Polly: It’s not age or marital status. I agree that it is the current culture of “buy now or be priced out forever.” It has always been the case that you need cash and no debt to buy a house. I was 37 and had been married 15 years before we first bought (yes, kids can thrive in a rental.) Your story shows that we have a long way to go.
Oh, and I liked your typo “real estate slum”.
Yeah, there are quite a few typos in that one. Oops. Slum=slump.
I just don’t get it. When I graduated we all just assumed that we would rent. It wasn’t even a question. I didn’t put too much effort into explaining the current credit bubble to her. It wasn’t worth it. But when she said that interest rates would just go up I did counter that higher interest rates meant prices would go down and you can refinance a high interest rate but not a high price. Not a peep. It was like she had never considered the idea. Nobody ever told me that it wasn’t such a bad idea to buy with higher rates and refinance when they came down. It’s just math. This woman has a brain. Don’t people use their brains when thinking about this stuff?
Oh, and she travels about 50% of the time. How is that a good time to buy?
I’m baffled.
This woman has a brain. Don’t people use their brains when thinking about this stuff?
Short answer: No.
“There was once a community of scoundrels, that is to say, they were not scoundrels, but ordinary people.”
Franz Kafka
“Great bodies of people are never responsible for what they do.”
Virginia Woolf
NAR has a new chief economist. He’s already being quoted by the press. He is seemingly even more positive and confident than his predecessor, the renowned Mr. Lireah. This is as good a time as any to start tracking this new eCONomist’s quotes.
“…start tracking this new eCONomist’s quotes.”
One of the first ones I saw last week: ‘All real estate is local.’
am i now persona non-blogga
Does anyone else see a bizarre pattern of list price clustering near round figures in their local markets? For instance, I see ten or so homes listed in my zip code (92127) on the range of the median to median - $5K (that is, from $1,295,000 to $1,300,000). The median list price SFR is currently just under $1.3m, at $1,299,999. Does anyone really care about $1 discount on a $1.3m home?
I’ve been tracking a few neighborhoods. Inventory up today; prices barely budging. It’s like watching paint dry.
I am wondering what is the strategy on high as the housing bubble unravels. My best guess:
1) Keep saying “everything is fine,” “subprime is contained,” etc.
2) Make sure the stock market gets back up to the flat line if possible on days when it tanks.
3) Execute bailouts beneath the MSM radar screen.
4) Assume that all will be fine if everyone just keeps the faith.
Not looking so good on Catalina Island…
http://apnews.myway.com/article/20070511/D8P2AJ900.html
Weekend Topic suggestion from a longtime lurker: Stalemate. Yesterday someone posted wondering what would happen if sellers COULDN’T lower their prices (because of no money to bring to the closing table) and buyers WOULDN’T pay the asking prices. Then what? My new husband and I are seeking housing in the far northwest burbs of Detroit. There is a lot of newer construction, filled with a lot of newer mortgages. I think a number of sellers would, in fact, take a low-ball offer if they could, but they CAN’T. So…now what? They are NOT being foreclosed upon in any significant numbers. How does this end? At some point will they just walk? Will they hold on to their houses and their FICO scores forever and ever?
At some point the lenders will intervene in a bigger way. And they will ultimately be much more willing and able to sell for a big loss.
Lots of wealth up there in Bloomfield. I’ll bet you’re seeing some nice houses for not too much money. Of course I could be wrong - I left Michigan 29 years ago.
For a weekend topic I would love to hear opinions or anecdotal stories about foreign real estate specuvestors. I was in Mexico twice recently and they claim everything is full steam ahead! Any thoughts?
Perhaps there should be a discussion thread on the subject of DL’s latest book, “All Real Estate is Local.”
Here is a quotation from the marketing blurb to whet your interests:
“In this book, I am following Grandpa’s lead. My objective is to offer you some valuable lessons on purchasing real estate. My Grandfather was not the only person to make a mistake in real estate. Mistakes are made by many households and investors every year. The common thread among them— they did not pay attention to local influences and activity.
I believe that if you master the lessons that I have learned over the years on how to evaluate and purchase real estate the local way—you will become a successful real estate investor—and make Grandpa proud.”
http://www.randomhouse.com/doubleday/catalog/display.pperl?isbn=9780385519229
News stories like this one Ben just posted from Norway lead me to suspect DL may be underestimating the effect of globalization on RE markets. The world is a little different now than when DL’s Grandpa was a young man.
http://www.aftenposten.no/english/business/article1776390.ece
Oh he’s full of crap. Realtors always talk up this local stuff to distract buyers and sellers from looking at the real estate big picture. They’re milking it all the way down. If people just paid attention to real estate cycles they wouldn’t make life-changing mistakes.
He has some locally devaluing Florida condos to sell…
I saw my farrier/realtor this afternoon and in between shoes he told me that nearly everything his company is selling right now is being bought by foreign money. Interestingly, they are selling far more raw land (20 acres and up,) than they are existing houses.
Then I read that Carlyle Group is going to float an IPO in June/July…with a subsidiary invested in (wait for it…) mortgage backed securities. WTF?!
Do these folks know something we do not? (well, duh.)
I think there is a lot of foreign money in So Cal real estate. Would be a good topic if we could actually get some numbers on it.
Anyone know if statistics are available?